Markets sell off as government shutdown drags on
Nick Rummell
MANHATTAN (CN) — Wall Street saw recent gains evaporate this week, as the dearth of significant economic data caused investors to quickly latch onto President Donald Trump’s latest tariff threats.
In a post on social media Friday morning, Trump said China was “becoming very hostile” and “holding the world captive” on rare earth metals. “I never thought it would come to this but perhaps, as with all things, the time has come” for a massive increase of tariffs on Chinese products, the president wrote.
Markets were already down before Trump’s remarks on Friday, but those losses accelerated on Trump’s threats. By the closing bell on Friday, the Dow Jones Industrial Average lost 1,278 points for the week, while the Nasdaq and S&P 500 declined 640 points and 163 points, respectively.
Prior to Trump’s saber rattling, others on Wall Street sounded the warning bell for a coming downturn. Most notably this week, JP Morgan Chase CEO Jamie Dimon said he expects a major drop in equities sometime in the next two years.
“I am far more worried about that than others,” Dimon said in an interview with the BBC. “The level of uncertainty should be higher in most peoples minds than what I would call normal.”
Concerns about tariffs and interest rates have taken a bit of a back seat as the government shutdown dominated headlines this week, though analysts downplayed the effects of the shutdown for now.
Grace Zwemmer, economist at Oxford Economics, wrote in an investor’s note that unless the shutdown lasts for weeks the supply-chain stress would be minimal, especially to that seen during the Covid-era shutdowns. However, she said certain sectors, such as pharmaceutical and agriculture products, could face a larger impact from the shutdown.
“Labor supply at warehouses and shipping distribution sites could be a pressure point if backlogs result in a large number of shipments that need to be processed once the government shutdown is resolved,” Zwemmer wrote.
In the meantime, Wall Street continues to fly blind on certain key data points while the government shutdown persists, though it could get some crucial updates.
The Bureau of Labor Statistics — which puts out the critical monthly jobs and inflation reports — reportedly recalled some staffers to put together the consumer price index that is due next week. According to the updated BLS schedule, the CPI will now be released a week and a half later than originally scheduled.
The paltry economic data released this week did not help much. The Federal Reserve released the minutes from its last meeting, though they did note that a “majority of participants” still worry about the “upside risks to their outlooks for inflation.”
The initial consumer confidence reading from the University of Michigan also changed little, remaining at 55 points after falling last month to the weakest point seen since 2009.
Consumers surveyed rated now as the worst time to buy durable goods since November 2022, and they also note that job prospects remain one of their biggest concerns.